2008 Woodie Awards
The economic approach to charity
Chris Rizzo
Issue date: 1/24/07 Section: Distractions
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I am looking for contributions to a charitable cause. I can assure you that it is an extremely worthy one, and by the time I am done describing it, your hearts, and more importantly your wallets, will be pouring open. It is a service project of sorts, but not with your typical type of service; I'm not going to be building houses or serving the hungry at a soup kitchen. Rather, this project is unique in that my service will not only help those to whom I give, but in addition it will provide me with a great deal of benefit. Imagine that, a service project with double the rewards! If you weren't intrigued before, you definitely are now. Already you can feel your hand reaching for your wallet, but allow me to continue anyhow.
In the field of Economics, there is a concept known as the consumption multiplier. In short, it states that every dollar of consumption generates subsequent transactions, which in turn creates extra income in the economy. In other words, you can take one dollar of income and by spending and consuming goods, generate a higher level of income within the economy. It is akin to dropping a rock in water; there is the initial splash, along with the subsequent waves it produces. It is thought that the marginal propensity to consume is about .80, meaning for every extra dollar of income you receive, you will spend 80%, or 80 cents. For example, if you take one dollar and spend it at Wendy's, that generates $1 of income for Wendy's. In turn, the restaurant spends $.80 on supplies, which generates .$80 of income for their suppliers, who in turn spend $.64, and etc. So in three transactions you transformed $1 into $2.44 of income infused into the economy. Imagine the good you could do by spending hundreds, or thousands of dollars!!
It is the continued spending of hardworking folk which keeps the American economy robust and helps us to maintain our place as the greatest country in the world. Being an extremely patriotic American, I decided to make this the focus of my service project - supporting the economy. I want nothing but the best for my country, so that my children, my children's children, and my children's children's children can grow up in a beautiful, rich America.
In the field of Economics, there is a concept known as the consumption multiplier. In short, it states that every dollar of consumption generates subsequent transactions, which in turn creates extra income in the economy. In other words, you can take one dollar of income and by spending and consuming goods, generate a higher level of income within the economy. It is akin to dropping a rock in water; there is the initial splash, along with the subsequent waves it produces. It is thought that the marginal propensity to consume is about .80, meaning for every extra dollar of income you receive, you will spend 80%, or 80 cents. For example, if you take one dollar and spend it at Wendy's, that generates $1 of income for Wendy's. In turn, the restaurant spends $.80 on supplies, which generates .$80 of income for their suppliers, who in turn spend $.64, and etc. So in three transactions you transformed $1 into $2.44 of income infused into the economy. Imagine the good you could do by spending hundreds, or thousands of dollars!!
It is the continued spending of hardworking folk which keeps the American economy robust and helps us to maintain our place as the greatest country in the world. Being an extremely patriotic American, I decided to make this the focus of my service project - supporting the economy. I want nothing but the best for my country, so that my children, my children's children, and my children's children's children can grow up in a beautiful, rich America.
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